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Home Depot Direct Exec Sees Growth In CE

Southampton, Bermuda — Home Depot Direct Brands president Shelley Nandkeolyar outlined the company’s catalog and online strategies and underscored the chain’s growing interest in consumer electronics at the 10th annual Consumer Electronics Association (CEA) CEO Summit, here.

He discussed plans for the direct operation during a one-on-one interview with CEA president/CEO Gary Shapiro.

Nandkeolyar, who has a broad experience in managing brands in the packaged goods and car industries, is responsible for Home Depot’s online presence, which offers plenty of CE products at competitive price points, as well as Home Depot’s general catalog and four specialty catalogs for upscale home improvement and home decorating products. The specialty catalogs launched last fall. He did not discuss any plans for a CE catalog.

Nandkeolyar said that Home Depot Direct’s goal is to have $1 billion in sales by 2010 and “we are on track for that — in fact, we should be there much faster.” He did not volunteer how much of that mix will eventually be in CE sales.

He identified for Shapiro and attendees which CE manufacturers he looks to as doing well in brand positioning. “Sony is doing a good job. I’ve seen what LG has done, and it is fascinating since they are now involved in a wide variety of [CE and major appliance] products. Philips is doing interesting stuff, but it is not eye-popping.”

From a strategic standpoint, Nandkeolyar said Home Depot Direct is trying to attract, “our competitors’ costumers. We are looking at new customers with categories that we have done well with in our stores. For instance, in our stores we have 25 to 30 SKUs of cooling and heating products. We now have 100 online.” The Home Depot’s Web site gets 5 million unique visitors a week, he added.

When asked by Shapiro how returns online or via catalog sales compare with Home Depot’s brick-and-mortar stores, Nandkeolyar noted: “Margin challenges are different, but costs are similar. Most stores have returns of 5 percent to 8 percent, while catalog sales are higher. Web site returns are similar to the store.”

Nandkeolyar said that his operation is “certainly looking at more CE sales, tactically. We have had very good online and direct sales efforts initially. There is a natural expectation that people think about CE products when they think about improving their homes.”

In the next year Home Depot “will spend more time and put more focus on consumer electronics, home theater and home automation. If we put focus, ‘heat’ behind a category, we can build a business.”

While discussing customer demographics, Nandkeolyar implied that some type of CE install may be part of Home Depot’s future. “We serve the whole spectrum, from the ‘do-it-yourself’ customers to people who want the full installation. We give the capability to the stores and see how they can implement that.” He added that the retailer is still training retail associates at the store to become more adept in selling across channels and referring consumers to catalog and online offerings.

Home Depot sees customers from “dabblers,” those that do a major project once every five years on their homes, to “home perfect,” consumers that do multiple projects at once. There are also “do it for me” customers who, Nandkeolyar said, “are older, have more money and could also be described either as a ‘dabbler’ or ‘home perfect’ customer.”

When asked how CEA and the industry itself can help the business grow in the near future, the Home Depot executive said, “The [advanced] level of product available is now at significantly lower prices than in the past. That can help bring more consumers to the market and drive business. What CEA should do, as champion of the industry, is to highlight concepts like home networking and talk about the possibilities.”

And Nandkeolyar volunteered to the audience that the industry should try to “get away from commodity products and get back to brand building. Try to make a more focused presentation and get more profitability back into some categories, or try to slow down [price cuts]. Can you get more margin upfront [in the product lifecycle]?” He suggested that since CE is “fascinating” consumers relate to its “fun” aspect and that creates more interest in the high end.